ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Definition: Monetary policy is the macroeconomic policy laid down by the central bank. It involves management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity.

Detailed explanation-2: -Monetary policy is a set of tools used by a nation’s central bank to control the overall money supply and promote economic growth and employ strategies such as revising interest rates and changing bank reserve requirements.

Detailed explanation-3: -The policy interest rate is an interest rate that the monetary authority (i.e. the central bank) sets in order to influence the evolution of the main monetary variables in the economy (e.g. consumer prices, exchange rate or credit expansion, among others).

Detailed explanation-4: -Central banks conduct monetary policy by adjusting the supply of money, usually through buying or selling securities in the open market.

Detailed explanation-5: -Expansionary monetary policy: The goal of an expansionary monetary policy is to boost the money supply and promote economic expansion. Contractionary monetary policy: It aims to decrease the money supply and control inflation. 12-Feb-2023